If you find yourself in a situation in which you are unable to make full principal and interest payments on your mortgage, your lender could seize the property, evict you, and sell the home[1]. Facing foreclosure is a frightening experience for homeowners. If you've fallen behind on your mortgage payments, don't give up right away. You have several options that may help save your home, your finances, and your credit rating.

Steps

Method1

Learning Good Habits

1

Learn about the process of foreclosure. The foreclosure process varies from state to state, so click here to investigate the laws in your particular state. According to the US Department of Housing and Urban Development, however, there is a general timeline of the process that you can look to as a guideline.[2] It is important to keep in contact with your lender during every stage. This will increase the chances you can work out some kind of arrangement.

Usually when you fall 3 months behind on your payments, your lender will contact you and inform you that you are delinquent. They will usually give you 30 days to bring your loan current. If you fail to do so, they may begin foreclosure proceedings. If possible, try to make arrangements with your lender at this point, since proceedings haven't begun yet.

After those 30 days are up, the lender will contact attorneys and begin the foreclosure proceedings. You will be notified when this happens, and will probably also be charged attorney fees in addition to your debt.

The lender's attorney will schedule a date of sale. This means that your lender is putting the house back on the market to resell. You can receive word of this a number of ways, including an official letter or a notice taped to your door. The date will vary, but is often 2-3 months from the day you receive the notice.

The date of sale is not a move out date. Your lender will notify you when you're expected to move out. You still have until the date of sale to pay off the debt or make some other type of arrangement.

2

Answer calls or letters from your lender. As you can see, you'll receive several notices from your lender before the foreclosure process starts. Some people choose to avoid letters or calls from their lenders if they're having trouble making payments. This is a mistake. In order to avoid foreclosure, you'll have to stay in contact with your lender.[3]

3

Take action as soon as possible. Don't wait until you are very far behind on your payments to address the problem. Ideally, you should contact your lender before you've missed any payments if you're afraid you might fall behind. The earlier you act, the better your chances of keeping your home.[4]

4

Stay in your home until ordered to move out. If you receive a notice that the foreclosure process is starting, you still have options. If you abandon the property, you may no longer qualify for certain assistance programs that can help you keep your home.[5][6]

5

Have all your financial information organized and close at hand. Whether you negotiate with your lender, contact a lawyer, or seek government aid, all will want to see your finances. Having all of this information easily accessible you will make negotiations go by smoother and faster.[7]

6

Learn about different types of scams. People facing foreclosure are understandably upset, and may jump on any opportunity they think will help. Con artists prey upon this mentality and can further victimize you. There are a number of different ways they can do this, so be on the lookout.[8]

Lease-back programs. This involves you transferring the title of your home to a lender who allows you to stay in the house as a renter. Con artists often claim that this is a temporary arrangement, but if you sign up for this you've effectively surrendered your home and will likely not get it back.

False intermediaries. Sometimes scammers offer to negotiate with your lender to modify your loan. They will often charge high fees for their "services," and by the time you realize that they aren't negotiating with your lender, you've already surrendered a lot of money.

Secret law claims. Some scammers pretend to be legal experts who know of a secret or little-known law that states you aren't required to pay your mortgage. Again, they will often charge high fees for their "services."

7

Consult an expert before signing any documents you don't fully understand. It is often difficult for someone without legal training to understand the terminology and jargon in contracts and documents. Scammers often word things in a confusing way. Some people may even unknowingly sign away their houses because they didn't properly understand the document. If you are unsure of anything in a document you've been presented, consult a licensed real estate agent or lawyer.[9]

Method2

Being Proactive

1

Contact your lender. Before you've fallen too far behind on your payments, your lender will probably be willing to work out some kind of plan with you. Once you do this there are a number of options.

Be persistent when contacting your lender. It may take some time to get the right department or person on the phone, but you need to stick with it to avoid foreclosure.[10]

2

Get all promises or agreements in writing. Whatever you end up working out with your lender, never trust someone's verbal promise. Insist on having all agreements and details in writing. Notarize these documents to make them more legally binding.[11]

3

See if your lender will accept a reduced or late payment. If you're afraid you won't be able to make a payment, don't let the deadline pass. Contact your lender and see if you can either pay a smaller amount by the deadline or defer the full payment to a later date.

Be sure to mention why you will be unable to make your payment. If you've experienced a pay cut or an unexpected expense, your lender may be more willing to work out a plan for you.[12]

Also say if you're expecting to receive money in the near future, like a bonus or raise. This will demonstrate to the lender that you'll be able to make the payment at a later date.[13]

4

Request a loan modification. Sometimes missing a payment is a one-time occurrence due to unexpected expenses. If your problems are more permanent and you will have trouble making payments in the future, however, you should see if your lender can adjust your loan. Most often this involves stretching out the loan over a longer period and lowering the monthly payments. This can make your monthly payments more affordable. This plan is helpful if you've faced a pay cut or recently lost your job.[14]

5

Refinance your home. You may be having difficulty making your payments because you're paying more than your home is worth. If this is the case, you can talk with your lender about refinancing your home and obtaining a new loan. This could make your payments more affordable.[15]

Method3

Seeking Foreclosure Alternatives

1

Obtain a partial claim. If you've missed a few payments, your lender may be able to work out a loan from the Federal Housing Administration. You can usually qualify if your payment is late by at least four months but less than twelve months. If you obtain a partial loan, the US Department of Housing and Urban Development will make a payment to your lender and make your loan current. These loans are typically interest-free.[16]

2

Seek government assistance. Several programs administered by the US Treasury and the Department of Housing and Urban Development are designed to help homeowners facing foreclosure. These programs can help you with refinancing, modifying your loans, and obtaining financial aid to avoid foreclosure.[17] A list of government programs designed to help homeowners facing foreclosure is available here.

There are also companies that provide similar services for people facing foreclosure. Be sure to investigate counseling agencies or anyone offering you help with your foreclosure. You can call the Department of Housing and Urban Development at 1-800-569-4287 to see if a company has been federally approved to provide this service.[18]

You can also contact your state Attorney General, the State Real Estate Commission, or your local Consumer Fraud Unit to see if these people have had any complaints or legal action against them.[19]

3

File for bankruptcy. While this may be an unappealing option, filing for bankruptcy can help save your home. Bankruptcy delays the process of foreclosure. This can help get you the time you need to pay off the loan or work out an arrangement with your lender.[20]

Remember that filing for bankruptcy won't protect you indefinitely. While bankruptcy usually stops the foreclosure process until your bankruptcy case closes, your lender can get court permission to reopen the case.

4

Sell your home. If no other steps help, it's possible that you simply can't afford your home. In this case, you can sell your home before the lender begins foreclosure motions. You can use the earnings from selling the home to cover the rest of your mortgage. While this method won't keep you in your home, selling the property is far less damaging to your credit score and finances than facing foreclosure.[21]

Stay in contact with your lender during this process. You may be allowed to stop making payments while trying to sell your house. Your lender is more likely to accept this if you can demonstrate that your family has experienced some kind of hardship like an illness or job loss.

If the house sale won't cover the mortgage, ask your lender about a short sale. This means that your lender will accept the proceeds from the house, even if they are less than you owe. It is best to contact a real estate agent or attorney when proceeding with a short sale. Sometimes lenders will still come after you for the remainder of the loan if you don't specify that the short sale will cancel your debt.[22]

5

Hand the deed back to your lender. If you cannot find a buyer for your home within a given period- usually a few months[23]- you can return the deed to the lender. This is essentially the same as a foreclosure, since the lender takes possession of the house and resells it. However, if you voluntarily hand the deed back, the lender won't file this as a foreclosure. This will save your credit rating and make it easier for you to get back on your feet afterwards.[24]